Please
note: We updated this page until election day 2001,
at which time it was "frozen." Information added to
this site after
election day 2001 will be on the Updates page.

Special
Note, Oct. 2007: Purely by coincidence, the 2007
City-sponsored measure to increase the UUT
was given the same ballot letter designation as the 2001
Citizen-sponsored measure to repeal the UUT!

Topic #1: The Surpluses. We have said that the
City does not need the utility tax because it has
consistently been running budget surpluses that are now
roughly equal to the utility tax revenue - a $2.4 million
surplus last year, a $1.5 million surplus the year before
that.

[Post-election
update: The surpluses have continued. To see
the current amount, click on the Updates link at the top
of this page.]

What is the evidence that those surpluses exist? Or are
they merely "roll-overs" from previous years?

Despite what some councilmembers and other city officials
told you recently (and in their 1999 election literature),
there is (and there was) a surplus. In
fact, the City has had surpluses at the end of each of the
last 5 fiscal years, and the surpluses continue to grow.
Since the existence of the surpluses is controversial, we
will demonstrate the surpluses in a variety of ways,
including newspaper articles and official City documents
linked below.

Here are the statements that first made us aware of the
surpluses.

"We're in great shape. Money is just pouring in."
(City Treasurer John Workman, quoted in Easy Reader of
2-5-98.)

"Viki, how much was the surplus, this year?""The total was around a million dollars."
(Councilmember Sam Edgerton and Finance Director Viki
Copeland, at 1-26-99 council meeting, during discussion
of the City's annual financial report. Transcribed from
the videotape.)

The situation has changed some since then. As noted at
the very top of this page, the more recent surpluses are
bigger. And their existence is no longer mentioned at
council meetings.

Topic #1, continued: "Roll-overs," or Surpluses?
Disinformation from No on H [of 2001 - see Special
Note, above]. In a recent letter to the editor, No
on H's campaign treasurer (who didn't disclose her
connection to No on H) wrote:

"They [backers of Measure H] don't seem to
understand that if a project is in this year's budget
but does not get completely funded or completed, it
rolls over to the next year's budget. They [backers of
Measure H] call the rollover a surplus." (Easy
Reader, 10-18-01, page 6.)

The "it's a roll-over not a surplus" canard persists
because in 1997 the City decided to stop calling the
surplus a surplus. (More discussion about that change is
under Document Set #1, below.) The City's documents make
it clear that the surpluses are not being kept in the
General Fund and rolled over to fund or complete ongoing
projects, but instead are automatically divided into three
equal parts and moved into other funds. Partly as a result
of those infusions of surplus cash, two of those other
funds have become bloated:

The first of those is the Insurance Fund, which has
received 1/3 of the surplus every year for the last five
(Note 1) - a total of $1.7 million . It had a balance of
$3.1 million at the end of the last fiscal year, up from
$2.5 million the year before and $1.7 million the year
before that (Note 2). In the present fiscal year
(2001-02) the insurance fund is expected to have revenue
of $1.2 million and expenditures of the same amount,
which should leave its balance unchanged, at $3.1
million (Note 3).

The other is the Equipment Replacement Fund, which also
has received $1.7 million from the surpluses. Despite
record purchases of new cars and trucks, and $300,000+
spent to prematurely and unnecessarily replace a fire
engine (Note 4), it had a balance of $1.8 million at the
end of the last fiscal year, up from $1.5 million the
year before and $1.4 million the year before that (Note
2).

Notes:
1. To see the official forms wherein the annual
surpluses were calculated and distributed to these
funds, see Document Set #1, below.
2. Balances are per the June 2001, 2000, and 1999
Treasurer's Reports. To see those reports - examine
Funds #705 and #715 - click here: Treas Rep 01 ---
Treas Rep 00 ---
Treas Rep 99.
3. Adopted Budget book, page 20, copy available at the
library or the Finance Department. Using starting
balance given in June 2001 Treasurer's Report.
4. Letter from citizen to council. Fire Engine Letter.

Topic #1, continued: Documents on the Surpluses.
Set #1.

Documents set #1: Sometime after the close of each fiscal
year the City's Finance Department calculates the amount
of the annual surplus and how it is to be disposed of.
They do that calculation on a form that was originally
entitled "Formula to Determine Transfer of General Fund
Surplus..." Over the years the form has been altered, both
as to its name and in its content as well. The form for
the fiscal year ending 6-30-96 was the last one on which
they called a surplus a "Surplus." Now they call it an
"Unexpended Funds Balance." More importantly, the method
of calculating the amount of the surplus was changed. One
major change first showed up on the calculation sheet for
the fiscal year ended 6-30-99, when the City moved
"designated reappropriations" upward so that they would be
subtracted from the surplus. Click on the link to the
right to see the forms from the last 5 years.

Because a surplus is no longer called a
surplus, and because the calculation method has been made
more complex, it has been difficult for our local newspapers
to get the facts about the City's surpluses. Nonetheless,
there were some articles confirming the surpluses.

Documents set #2: If, year after year, you spend less than you take
in (run a surplus), the balance in your bank accounts or
investments goes up. The City's bank accounts and
investments have grown 50%, rising from $14 million up to
$21 million, in just the last two years.

Topic #2: Campaign Contributors. The Yes
on H [of 2001 - see Special Note, above] committee plans
to spend less than $1000 during the entire campaign, so is
not required to file campaign spending disclosures. On the
other hand, No on H had raised $7617 as of mid-September.
Who is providing that money? So far, the only large
contribution disclosed has come from the union for some of
the employees at City Hall. The next disclosures are due
shortly, 12 days before the election. But if this campaign
is typical, the most interesting contributions won't be
revealed until well after the election is over (in the
filings due January 2002). Nonetheless, using recent
history as a guide, it is possible to predict the
identities of some of the contributors. We need only look
at the contributors to the 1999 No on D campaign. The only
retail businesses contributing were four restaurants
located on the Plaza, who gave $2300. And only one out of
the four was identified in reports filed prior to 1999's
election date. The other three were not disclosed until
January 2000. Those merchants' motivation to contribute
should be self-evident. To see the complete campaign
filing documents from 1999, click on this link: Contributions (220KB).

Note added 10-30-01: Another set of campaign
spending disclosures (covering 9-23 to 10-22-01) has
just been filed. No on H filed just one page listing its
recent contributors. That page has been added to the
bottom of the page containing the 1999 contributions.
The link is directly above.

Topic #3: Employee Compensation. City employees are
generously compensated, with excellent benefits, job
security, and retirement. To see a listing of the amounts
paid to Hermosa employees in 2000 (26 employees earned over
$90,000, 10 earned over $110,000), click on this link: 2000 Wages.

Topic #4: History. What is the history of
Hermosa's Utility Users Tax? Click on this link: UUT History (120KB).

Topic #5: Sewers. No on H's literature claims:

"Public health will suffer if sewers are not
repaired and rehabilitated. This year the city
budget appropriates $700,000 from the General Fund
to maintain city sewers. This maintenance will have
to be cut back severely if the UUT is repealed."

We find this claim ludicrous. A quick glance at the
Treasurer's Report for June 30, 2001 (Treas Rep 01)
reveals that the Sewer Fund began the current fiscal
year (2001-02) with a balance of $3,374,490, more than
sufficient to complete the $2,667,172 of sewer projects
in the City's Capital Improvement Program (CIP), without
the planned transfer of $700,000 from the UUT
income stream. To see a table of those CIP projects,
click here: Cap
Improv Table (110KB). It is interesting to note
that that table shows no new sewer projects approved in
the current budget year - the projects are all from
fiscal years 1999-2000 and 2000-01.

Topic #6: Street Projects. A repeat of the sewer
scare tactics. No on H's literature claims:

"Residential street repairs will be severely
reduced with the loss of UUT funds."

The June 30, 2001 Treasurer's Report reveals that the
six funds that provide the money for street repairs
started the current fiscal year with total balances of
$3,661,000, more than sufficient to complete all of the
street repair projects in the Capital Improvement
Program without any further appropriations. Furthermore,
five of the six funds are not dependent upon UUT money
at all. Their money comes from gas taxes and downtown
parking revenue. Those five funds are expected to
receive $2,379,000 additional income during the year
(see 2001-02 budget book, funds #109, 115, 120, 146 and
150 on pages 12 - 16), bringing the total balances
available to fund street repairs to $6,040,000 - without
the planned $400,000 transfer from the UUT!
Significantly, that $6 million available this year is
2/3 of all the money needed to fund all 5 years of the
$9 million street repair program the public has been
promised. (For documents, see links in Topic #5, above.)

Topic #7: Police/Fire Funding. No on H's [of 2001
- see Special Note, above] literature says that of the
expected $1.8 million of UUT revenue, $700,000 will stay
in the General Fund "to help pay for safety." That raises
the question: Since there's no absolute guarantee that
there will be a surplus again, how can we make up for that
$700,000 and balance the budget?

We believe that there is at least $1,400,000 in
expenditure adjustments and new revenue available to the
City, with at least $1,100,000 of that being repeatable
every year. See below.

Expenditure Adjustments. Police and
fire overtime, which amounted to at least $456,000 in
Fiscal Year 1999-2000, should be carefully examined.
The automatic $350 per month car allowance for
councilmembers and department heads should be reduced,
saving $25,000. The Assistant Fire Chief position,
established earlier this year but not yet filled,
should be cut, for a savings of $180,000. The City
Hall remodel that is now starting, already over twice
the cost of the original budget, must be monitored to
minimize cost overruns. The City must learn to not
repeat its past spending blunders. For more details,
click here: Exp/RevenueDetails.

New Revenue Sources. Raise the Bed Tax
percentage, get $405,000. Promote PCH businesses, get
$100,000 more sales tax. Bring the hourly rate we
charge to provide police to big event promoters up to
our cost level, get $50,000. Apply for a GALE grant
for alcohol enforcement, get $40,000. In many
locations, raise the sidewalk dining rent, presently
$1 per foot, get $100,000. Enact a new sales permit
fee on liquor and other high risk businesses to offset
the extraordinary legal and police/fire costs arising
from the downtown club scene, as the City of Santa
Cruz has done. Get $200,000. On a one-time basis, move
back to the General Fund the $300,000 of Compensated
Absences Fund money that the council was going to take
for the City Hall remodel. For more details, click
here: Exp/RevenueDetails.

The total of expenditure adjustments and revenue
sources above is at least $1.4 million, $1.1 million of
which is repeatable annually. There are numerous other
possible expenditure/revenue adjustments available to
the City. For example, at the 6-12-01 council meeting,
with a stroke of the pen the Council increased parking
fees to bring in an additional $667,000 annually.

Topic #8: Other Taxes. More disinformation
from No on H [of 2001 - see Special Note, above].
No on H's literature claims:

"The Utility Users Tax is the ONLY tax you are
charged, in which every dollar comes back to the
city."

Topic #9: Other Cities' UUT's or Lack Thereof.
Many neighboring cities do have UUT's, but we haven't
found a city anywhere that automatically exempts citizens
simply because they're 62 years young, as we do here. They
all have an "income test." El Segundo's UUT doesn't apply
to residences at all, and is a maximum 3%, 2% on phone
service. Palos Verdes Estates' UUT will "sunset" (expire)
in 2003, as ours was supposed to 13 years ago. Long
Beach's UUT rate is being cut in half over the next few
years.

Manhattan has no UUT. Their "vote on a bond" process
offers many advantages over our system. They get to vote
as to which projects get funded. They get more project for
less money: Their current $15 million bond will cost a
flat $54 annually per household, and since they will be
"paying later," they will be paying in deflated dollars.
In contrast, we Hermosans begin to pay UUT for our
projects several years in advance, get to
watch our dollars deflate while they are sitting inactive
in the City's large savings account during those years;
and the UUT levy we pay will continue to rise with the
cost of utilities. Finally, MB residents' bond payments
are on their property tax bills and are easily tax
deductible while our UUT payments are not.

Topic #10: The MacPherson Oil Lawsuit. It's been
argued that we may need the UUT money in order to pay
MacPherson off, should he prevail. However, the City's
latest Comprehensive Annual Financial Report says (at page
40):

"In the opinion of the City's management, the event
will not have material adverse effect on the financial
position of the City."

Special
Note, Oct. 2007: Purely by coincidence, the 2007
City-sponsored measure to increase the UUT
was given the same ballot letter designation as the
2001 Citizen-sponsored measure to repeal
the UUT!

Topic #11: If we vote it out, can we vote it back in?
No on H [of 2001 - see Special Note, above]
repeatedly misleads the voters. As of 10-30-01 the
following "Q & A" was posted on the No on H website:

Correction, byYes on H [of 2001 - see Special Note,
above]: It takes only a simple majority
to vote in a general purpose tax - one that goes into the
General Fund as our present UUT does. It's hard to believe
that the councilmembers behind No on H don't know that. Is
this a repeat of November 1999, when the anti-repeal
ballot pamphlet argument signed by four councilmembers
claimed (incorrectly):

(We first noticed the "vote it back in" question and
(incorrect) answer on No on H's website on 10-30-01. It
was the top-most item on their "More Facts" page.We
posted the correction (above) on this website on the
31st. By November 1 the Q & A had disappeared from
No on H's site!)

Late Note: No on H [of 2001 - see Special Note,
above] carefully re-worded their "2/3 vote"
claim, and put it back up on their website on 11-4-01:

Yes on H [of 2001 - see Special Note, above] stands by
our original answer - it takes only a simple
majority. A common practice among cities is to
fund popular and/ornecessary programs with
surcharges such as UUTs, and unpopular programs from
regular taxes. Assuming our present UUT has been voted
out, a future city council which wanted to convince the
voters to enact a new UUT would most likely cite the need
for money to fund popular activities such as police, fire,
sewer and street repair - just as they have done during
the current campaign. And a tax that pays for general
activities such as those is a "General Tax" that requires
only a majority vote.

Topic #12: Hard Times Ahead, "Take-Backs" by the
State? No on H has argued that we will need the UUT
to make up for cuts in other City revenue.

We believe that our local economy will remain healthy,
that Hermosa will continue to be a very desireable place
to live, and visit. Compared to Northern California's
Silicon Valley, our property values are holding strong as
are our local defense industry's contracts. We believe
that this is not the time to take money out of local
circulation. So do our Federal and State legislators. They
have encouraged spending as opposed to saving or taking,
and are considering a State bond to deal with their
potential deficits. The Hermosa City Council must see the
future that way also. Otherwise, why would they have just
approved (August 28) spending $2 million+ to remodel a
portion of City Hall, a low-priority, non-urgent project?

Topic #14: Better Uses for Your Money. The City
government does not need the Utility Tax income. To
residents who see paying the UUT as a reasonable civic
contribution, we suggest donating instead to our schools
and library, which do not have surpluses. They have an
enormous effect on our quality of life and our property
values. Their addresses are: